Method and system for using reward points to liquidate products

ABSTRACT

A user selects a product to be liquidated from a product provider and then designates to the transacting entity that reward points are to be used towards the purchase of the liquidated product. The transacting entity acts to decrease the number of reward points in the user&#39;s reward account by the required number of points. The reward account holder conveys consideration to the transacting entity equivalent to the par value of the reward points consumer obtains the product in exchange for reward points having a retail value equivalent to what he would have otherwise paid for the product, while the reward account holder is required to convey only the par value of the points. The product provider is able to liquidate the product and obtain payment equivalent to what it would otherwise have obtained in a prior art liquidation process, auction or trading environment.

CROSS-REFERENCE TO OTHER APPLICATIONS

This application is a continuation application of application Ser. No.12/105,751, filed on Apr. 18, 2008, now U.S. Pat. No. ______; which is acontinuation application of application Ser. No. 10/921,085, filed onAug. 18, 2004, which claims the benefit of provisional patentapplication Ser. No. 60/503,299 filed on Sep. 15, 2003 and which is acontinuation-in-part application of application Ser. No. 10/608,736,filed on Jun. 27, 2003, now U.S. Pat. No. 6,820,061; which is acontinuation application of Ser. No. 09/602,222, filed on Jun. 23, 2000,now U.S. Pat. No. 6,594,640; which claims the benefit of provisionalpatent application Ser. No. 60/140,603, filed on Jun. 23, 1999.

BACKGROUND OF THE INVENTION

The present invention relates to electronic trading, exchange,liquidation and bartering systems that allow users to trade or redeemreward points, such as those already accumulated in airline frequentflyer programs, into an account for redeeming products and servicesoffered over a broad based communications system such as the Internet orinteractive television. This would allow users to use their frequentflyer (or frequent car rental, frequent dining, etc.) points forproducts or services other than those which may be typically offered bythe point sponsor. The points would be sold back or traded to theissuing entity or other third party. The system would also allow forpurchase by users of points traded in by other users, such that pointsmay be redistributed without incurring a transaction directly with theairline or other issuing entity.

The present invention also allows for manufacturers and distributors ortraders of goods to put overstocked, discontinued, returned, or end ofrun products into a liquidation process that can be redeemed, purchased,traded or exchanged for reward points or similar value.

In order to attract and retain business customers, airlines, hotels, carrental companies, chain retailers, telecom providers, etc. havehistorically introduced frequency use programs that offer awards of“frequent flyer miles” or other such incentives schemes based on thedistance traveled, amount of money spent, or use by that customer.Success has enabled airlines to modify the manner in which mileage wasacquired to include travel related purchases by consumers. For example,a percentage of the dollar-based cost of a hotel stay may be awarded asmileage to a client account. Within the past several years, credit cardcompanies or other retailers and etailers have co-branded credit cardsin the name of airlines, oil companies, retailers, service companies,and the credit card company where each dollar spent using the card isrecorded as a mile or unit of travel, reward point or similar value inthe award program or some monetary value assigned by the issuer. Thesecards may additionally award bonus miles, points or other value incoordination with user purchases of preferred products or flights duringpreferred times.

U.S. Pat. No. 5,774,870, FULLY INTEGRATED, ON-LINE INTERACTIVE FREQUENCYAND AWARD REDEMPTION PROGRAM, issued to Netcentives, Inc. on Jun. 30,1998. The '870 patent provides a system whereby the user can makepurchase of products over the Internet and receive award points, whichare stored in an associated database. The user can subsequently view anaward catalog to determine which awards he may be able to redeem basedon the number of points in his account. This patent does not teach,however, the ability of a user to trade-in his points accumulated in apre-existing frequent flyer account in order to make purchases ofproducts from the award catalog or allow the points to be pooled withother programs in order to gain further purchasing power.

The ClickRewards program site appears to operate in the same fashion asthat described in the '870 patent; i.e. it allows users to gain points(called “ClickMiles”) for making an online purchase of a product throughan associated web site. For example, ClickMiles may be awarded for apurchase of Gap products at the Gap web site. The ClickMiles canultimately be redeemed for frequent flyer miles, for example at one ofseveral major airlines. Another web site, www.webflyer.com, isassociated with ClickRewards and provides ClickMiles for purchasingfrequent flyer-related goods, such as guidebooks.

The ClickMiles Reward Catalog allows the user to redeem the ClickMilesfor merchandise in the alternative to frequent flyer miles. For example,a CD can be obtained from CDNow by redeeming 900 ClickMiles.

Although the ClickRewards program allows a user to redeem accumulatedpoints for obtaining merchandise over the Internet, it does not allowfor the redemption of frequent flyer miles from a pre-existing accountto be traded for reward points.

U.S. Pat. No. 5,794,210, ATTENTION BROKERAGE, issued on Aug. 11, 1998 toCyberGold, Inc. The '210 patent describes a system that makes immediatepayment to a user for paying attention to an advertisement or other“negatively priced” information distributed over the Internet. A specialicon or other symbol displayed on a computer screen may representcompensation and allow users to choose whether they will view an ad orother negatively priced information and receive associated compensation.The points accumulated can then be used to purchase “positively pricedinformation” or products.

The CyberGold web site, www.cybergold.com, describes an “earn and spend”community in which users earn “cash” online, for example by visiting aportal site. The earnings can then be used to make online purchases,such as software.

Again, although the '210 patent and the CyberGold web site describe anincentive system that allows users to purchase products or services overthe Internet, neither teaches the ability of the redeeming frequentflyer miles from a pre-existing account for reward points.

U.S. Pat. No. 5,025,372, SYSTEM AND METHOD FOR ADMINISTRATION OFINCENTIVE AWARD PROGRAM THROUGH USE OF CREDIT, issued on Jun. 18, 1991to Meridian Enterprises, Inc. The '372 patent describes an incentiveaward program in which credit is awarded to participants based on theparticipant meeting a designated level of performance under the system.This patent does not teach the ability to increase the reward points ina user's account by redeeming points from a pre-existing account such asa frequent flyer mileage program.

With regard to FIG. 1, a model of the frequent flyer systems of theprior art is presented. Two different airlines servers are shownsurrounded by their related marketing partners, the first groupinglabeled Airline 1 100 and the second independently operated butfunctionally similar grouping labeled Airline 2 200. In order to luremore business travelers, the airlines 100, 200 have establishedmarketing agreements with travel related companies to provide thebusiness traveler with a more robust way to generate rewards in the formof frequent flyer miles. These marketing arrangements or associationshave typically involved credit card companies, phone companies, hotelchains and car rental companies. Any purchases made through these“co-branded” partners were then awarded to the user periodically. Bonusmiles or points may additionally be accumulated based on the user'sactions in response to offers made by the airline or in coordinationwith the partner company. For example, phone companies offer bonus milesto users based on the user's agreement to change phone service. Thesepoints are obtained by the partner companies by purchasing them from theissuing entity for redistribution as an incentive to utilize theirparticular goods and/or services. FIG. 2 shows some sample co-brandedcards that are representative of marketing agreements between TWA,Sprint, and Mastercard. In order to receive these benefits, the usermust sign up with each of the partner companies separately and providethe frequent flyer account number that is to receive the credited miles.A user either making phone calls or purchases in accordance with theagreements made with each of these partners will first accumulate avalue on the partner's system which in turn is periodically updated onthe issuer's reward server to reflect the value earned during thatperiod. FIG. 3 is representative of a typical user account that showsvarious earnings in the system transferred in from any of the co-brandedpartners. The records of the table in FIG. 3 identify the source of therewards, the dates they were recorded and the number of miles associatedwith that transaction. The user can view the accumulated miles byaccessing the issuer's reward server or by tracking the individual valuereported to the user through the various bills the user receives fromeach of the co-branded partners.

The prior art does not provide for a consumer to utilize relativelysmall amounts of reward points in any manner. In addition, a consumeroften can only redeem points in an airline-related manner (i.e. toobtain a free ticket or upgrade from coach to first class). This priorart does not recognize the need for a consumer to exchange reward pointsfor non-travel related goods, and in particular renders relatively smallnumbers of points useless. For example, a consumer that does not traveloften may have 500 points in United Airlines, 700 points in USAir, and1000 points in TWA, each of which is relatively useless in the priorart.

What is desired therefore is a system where users may submit frequentflyer awards, reward points or other credits accumulated for other typesof transactions for redemption or translation into a form readilyacceptable by a participating merchant. An exchange rate will beestablished for the relative consideration received by the companiesinvolved in the transaction. A user should be able to pool, trade oraggregate the various earned rewards that may exist in currentlyseparate reward server systems where the resulting combined value may beused by a user of the system to acquire items of equivalent or relativevalue. In another embodiment, the award program looking to reducefrequent flyer liabilities or exchange redemption opportunities toincrease customer satisfaction may contact users (or be contacted byother members of the system) and arrange for a transfer of the rewardpoints into a value (which may be predetermined) to be credited to thetrading system reward account. Alternatively, the points may be used inan auction environment where points may be used to bid for certainawards, products, services, or points from other programs. A user canutilize points to bid for products or use value to bid for points.Groups of bidders may pool points together for purchases or donations. Auser who has earned frequent flyer miles or rewards from several pointsissuers that, individually, may be insufficient to receive any directvalue for their mileage may be able to pool the miles acquired fromseveral different points issuers to transfer the awards accumulated tothe trading system of this invention. The user may have the selecteditems delivered by performing a purchase request by various means suchas over the Internet, dialing a toll free number for placing an order,or any other means of placing an order that will accept payment fromthis system.

It is further desired to provide a system and method that enablesproduct providers such as manufacturers, wholesalers, distributors,retailers and/or liquidators to liquidate their products through aliquidation service run by a transacting entity such as a liquidationbroker, which will accept reward points directly or indirectly from auser as consideration (in whole or in part) for obtaining the product.

It is also desired to provide a system and method for users to purchase,sell, or trade in points or blocks of points or value, wherein the valueand/or cost of the points is a function of the open marketplace or theperformance or desire of the issuing, trading, selling purchasing orredeeming entity, either presently or at some time in the future. Thiswould allow users to obtain points in the present time based on eitherthe present or the future performance of the issuer.

SUMMARY OF THE INVENTION

This invention allows a user to purchase goods or services using rewardpoints held by a variety of award programs or co-branded partners (whereindividual accounts may or may not be maintained) that are aggregatedinto an exchange account. A frequent flyer program is typical of thesystems to be encompassed by this invention. Tie-in promotions have beenintroduced over the past several years that have allowed purchases forgoods and services such as hotel or car rentals to accumulate awardmiles that are then recorded on the airline award system. More recentlycredit card companies offer cards where a mile or point award (orsimilar value) is made for every dollar spent using that credit card.These cards may additionally award bonus miles, points or other value incoordination with user purchases of preferred products.

A system and method are disclosed where the system allows the user toredeem the reward points aggregated from a plurality of reward entitiesfor exchange with a merchant or other trader or member of the system(referred to generically herein as a “merchant”). As used herein, areward or reward point refers generally to a frequent flyer mile orcredit, reward point, rebate, cash-back value, or any other valueawarded by a party to a consumer (also known as a user) based on atransaction between the party (or an affiliated party) and the consumer,where that reward is typically tracked by the entity issuing the rewarduntil redeemed or otherwise surrendered or retired by the consumer orother user. The process for redemption or exchange of thepre-accumulated reward points under this invention comprises the stepsof the user requesting, via a user computer or other electronic device,an exchange server computer (also referred to as a trading servercomputer) to obtain reward points from a reward server associated with arewarding entity with which the user has reward points or other value.The reward server computer decreases the number of points or amount ofvalue in the user's reward point account by the requested number ofreward points. The reward server computer conveys consideration to theexchange server computer, where the consideration corresponds to thenumber of reward points decreased in the account of the reward server.The exchange server computer increases the reward exchange account onthe exchange server associated with the user by the requested number ofpoints or value. The exchange server receives the consideration from thereward server computer. Following or anticipating this conversion intothe exchange server, the user requests a purchase, exchange or trade ofan item from an associated merchant computer by selecting the item to bepurchased from a plurality of available items. The exchange servercomputer confirms that the user's reward exchange account containssufficient points or value to obtain the selected item or that theoffered amount has been accepted. The user may purchase or borrowadditional points or value in the event that his account does notcontain the requisite number of points or value for making the purchasetransaction or the user's offer has not been accepted. The user may alsoprovide cash or other consideration as partial payment for the itemselected. The exchange server computer requests the merchant computer todeliver the item to the user. The exchange server decreases the userexchange account by the number of points corresponding to the purchasedor exchanged item and the exchange server computer conveys considerationto the merchant computer equivalent to the required points. In anotherembodiment, the user may redeem rewards at the reward server followingthe selection of an item to be acquired. Policies may be established toautomatically contact each of the servers according to a userprocurement profile to transact the required payment. This profile mayindicate the order of redemption and method of providing fundssufficient to cover the purchase after redeemable points are exhausted.After redemption the appropriate consideration is transferred to therespective merchant.

In a further embodiment of the invention, product providers such asmanufacturers, wholesalers, distributors, retailers and/or traders areable to liquidate goods via a transacting entity such as a liquidationbroker or exchange service, which acts to exchange a user's earned orotherwise acquired reward points for the liquidated goods in a mannerthat is transparent to both the redeeming user and the product provider.In this embodiment, a user selects a product to be liquidated from aproduct provider (such as the product manufacturer, wholesaler,distributor, retailer or trader). The user may be a consumer, or it maybe a third party such as a trader or the like. The user designates tothe transacting entity that reward points are to be used towards thepurchase of the liquidated product in whole or in part. The rewardpoints may be obtained directly from a reward account held by a rewardserver on the user's behalf, or they may be obtained from an aggregatedreward point exchange account that holds reward value aggregated frommultiple reward points issuers. In any event, the transacting entityacts to decrease the number of reward points in the user's rewardaccount, as either designated by the user or by a third party (ordirected by a prearranged set of rules), by the required number ofpoints. The reward account holder (which is either a reward issuer or anaggregator) conveys consideration to the transacting entity equivalentto the par value (or a portion thereof) of the reward points. In thiscase, the consumer obtains the product in exchange for reward pointshaving a retail value equivalent to what he would have otherwise paidfor the product at a retail store (a “reference price”), while thereward account holder is able to convey only the par value of the points(which is generally substantially less than the retail value of thepoints). The product provider is able to liquidate the product andobtain payment (the lower par value of the reward points) equivalent towhat it would otherwise have obtained in a prior art liquidationprocess, auction or trading environment, but without having to gothrough a typical “liquidation process” with its accompanying branddevaluation and associated costs. The reward account holder is able toeliminate the liability of the reward points previously owed to theuser, but pays far less (only at the lower par value) than the retailvalue of the points assigned by the user. As described, the user mayutilize reward points from a single reward issuing entity, or he mayaggregate points from multiple reward issuing entities as describedherein (cash and/or other consideration may also be combined with pointsas described herein).

BRIEF DESCRIPTION OF THE DRAWING

FIG. 1 is representative of the prior art marketing arrangements used inreward programs;

FIG. 2 is a representation of the co-branded partners in a prior artaward program;

FIG. 3 is a sample of the prior art reward summary from an airlinefrequent flyer system;

FIG. 4 is a block diagram of the components of the present invention;

FIG. 5 is a block diagram of the system components of the presentinvention;

FIG. 6 is a data flow diagram of the process for a user to redeemrewards;

FIG. 7 is a data flow diagram of the user request for purchase of anitem at a merchant site;

FIG. 8 is a data flow diagram of the user account creation process onthe exchange server;

FIG. 9 is a data flow diagram of the offer process by a reward programor by a merchant;

FIG. 10 is a data flow diagram of the process where a user may beredirected from a reward program to the exchange server of the presentinvention; and

FIG. 11 is a block diagram of the liquidation process of the presentinvention.

DETAILED DESCRIPTION OF THE PREFERRED EMBODIMENT

With reference to FIG. 4, a plurality of reward server computers 10, 12,14, a trading server (also referred to as an exchange server) 20, amerchant computer 30 and a user computer 40 are shown in communicationwith a network 2. The network may comprise any type of communicationprocess where computers or computing devices may contact each other. Thepresent invention will be described with respect to an Internet-basednetwork where the reward server computer 10 is associated with anairline frequent flyer program. Any type of reward server may also beused in this system. The reward server computer may be a credit cardreward program such as that offered by AMERICAN EXPRESS where the userearns rewards based on purchases, or an advertising based award programwhere the user earns rewards by selecting advertising content forviewing on the Internet.

A user of this system may acquire and accumulate rewards through anyprior art means such as that shown on FIG. 1, which are then posted in auser's reward point account 52 that is accessible through the rewardserver computer 10. The exchange server computer 20 is in communicationthrough the network 2 with a user on a user computer 40 and isadditionally able to connect to the reward server computers 10, 12, and14 through the network 2 in accordance with techniques well known in theart for Internet communications. Alternative electronic communicationsmethodologies may be used, such as an ATM, POS device or credit cardnetwork interface device adapted to allow a user to access his accounts,or a smart card reader, etc. The merchant computer 30 is representativeof any site that can communicate with the network that has goods orservices for sale or trade. The merchant may have a direct relationshipwith the exchange server where the direct relationship allows for astreamlined process for allowing a user to acquire products offered viathe merchant computer. Alternatively, the merchant computer may be anindependent merchant that does not currently have a profile defined inthe exchange server that will accept payment from another computersystem in any one of well known e-commerce embodiments.

The rewarding entities may be any type of entity that has a service forallocating points or consideration for user actions. The reward servercomputers 10, 12, 14 may be of any type of accessible server capable ofholding data about a user along with a corresponding earned value thatis negotiable for other goods, services, or points of another system orfor use internal to the trading system. In the preferred embodiment, theairline reward server computer 10 may refer to one or several differentairlines that have frequent flyer programs or the like. The credit cardreward server computer 12 may refer to any type and number of creditcard server systems capable of holding, increasing or decreasing auser's earned rewards acquired according to the terms of the credit cardprogram to which the user has enrolled. The marketing reward servercomputer 14 may refer to one or a multitude of network accessiblemarketing systems that allow a user to have an account where points orother redeemable value may be stored, updated and redeemed by a user.The exchange server computer may be any type of computer system thatallows users to access the system in order to perform the processesinvolved in this invention. In the preferred embodiment all of thesystems described are accessible through the Internet and the user mayautomatically or freely navigate to any site by means well known in theart.

The present invention allows points issuers, who originally sold rewardpoints in their program to third parties for use as an incentive bythose third parties, to repurchase or trade points at a substantialdiscount, thereby reducing their liability and allowing for a tradingstrategy that enables points to continually be sold, traded orrepurchased. This process may be executed under a separate accountingprocedure than what is otherwise used for points that are granteddirectly from the issuer.

The method of allowing the user to redeem the accumulated reward pointsfrom one or more of a plurality of reward entities will now be describedwith respect to FIG. 4 and the data flow diagram of FIG. 6. The exchangeserver system would allow users to log in to access the functionalityprovided, where the user may interact with applications, forms orcontrols. For example, the user may view his account information byusing a web browser which may automatically select or allow the user toenter the appropriate identification information and then selectbuttons, links or other selectable objects to navigate to the part ofthe system desired. In the alternative, navigation may be doneautomatically by the web site, and thus be transparent to the user (i.e.not directly controlled by the user). If the user does not yet have anaccount (step 602), then the user may be enrolled per the flow diagramof FIG. 8 (step 604) as discussed below. The user, from the usercomputer, makes a request to the exchange server computer 20 viacommunications flow 102 (step 600), requesting redemption through thenetwork 2 for either all or a portion of the pre-accumulated rewardpoints stored for the user in one of the rewarding entities. A user'sreward point account 52 is associated with each of the reward serversbut is only shown in FIG. 4 connected to the airline server for sake ofclarity. Communications are made by the exchange server 20 to the usercomputer 40 via communications data flows 104. The user mayinteractively select rewards to be redeemed, or the system may determinewhich rewards are to be redeemed based on a previously defined userprofile rule or other third party profile rule (such as an issuer) (step606). The exchange server computer 20 obtains the reward points balanceinformation from a reward server 10, 12, 14 stored in the user's account52 by contacting the appropriate reward server via communication flow110 (step 608) according to the user's requirements, by using theconnection parameters as defined in a database 54 on the exchange serveras shown in FIG. 5. In one embodiment, the exchange server retrievesreward point account balance information via communications flow 114(step 610) from the reward server for the user. In another embodiment,the exchange server transfers as part of the communication 110, therequested reward points to be redeemed (step 612). The reward servercomputer 10 decreases the user's reward point account 52 by therequested number of reward points (step 614). The term point is used toreference any earned value that has a cash equivalent or negotiableworth as in “frequent flyer” point or mile. The reward server computer10 conveys consideration to the exchange server computer 20 where theconsideration corresponds to the number of reward points decreased inthe user's account 52 on the reward server 10 (step 616), taking intoaccount a conversion rate that may be stored in the database 54. Forexample, the consideration may be in the form of a monetary credit to anaccount that exists between the exchange server and the reward server,that gets paid at the end of a predefined billing cycle (i.e. everymonth) or in real time or upon execution of a trade or redemptionprocedure. The exchange server computer 20 increases the reward exchangeaccount 54 associated with the user by the received number of points(step 620). The exchange server computer 20 in turn, receives theconsideration from the reward server computer 10 (step 618).

Similar communications are made between the exchange server 20 and thecredit card reward server 12, as indicated by the data communications120 made by the exchange server 20 to the credit card reward server 12and the data communications 124 made by the credit card reward server 12to the exchange server 20. Likewise, communications are made between theexchange server 20 and the marketing reward server 14, as indicated bythe data communications 130 made by the exchange server 20 to themarketing reward server 14 and the data communications 134 made by themarketing reward server 14 to the exchange server 20. In each case, theexchange server 20 increases the user's reward exchange account 54 bythe received number of points from the credit card reward server 12 andthe marketing reward server 14, respectively, based on the appropriateconversion rate. Exchange rates may float or be variable according tovalue of the acceptance of bid and ask terms.

In the second part of the transaction (see FIG. 7), the user from a usercomputer 40 may make a request 150 to purchase an item from anassociated merchant computer 30 (step 700) or from a catalog or networkof offerings or special event offerings as a one-time or unique event.In the preferred embodiment, the merchant computer system will be anetworked computer system accessible via the Internet. The user wouldvisit the site by selecting on a link from the exchange server's website or by entering the name or address of the destination web site orproduct brand or category desired. The web site may also be pushed tothe user rather than pulled by the user as described above. The user mayidentify one or many items to be acquired from one or several merchants30. The user elects to pay for the desired item with points (step 702),and the user is redirected from the merchant server to the exchangeserver at step 704. If the user does not have an account (step 706) thenthe user is enrolled per the flow diagram of FIG. 8 (step 708). Themerchant server computer 30 would confirm that the user has sufficientpoints or value to purchase the selected item by communicating with theexchange server 20 via communication flows 140, 144 in order to checkthe user's reward exchange account 54 (step 710). If the user does nothave enough points in his reward exchange account at the exchange server20, then the process of trading more points from the user's reward pointaccount 52 into his reward exchange account 54 is executed by branchingto the flow diagram at exit point A (step 712) which brings the processto the flow diagram in FIG. 6 discussed above. After enough points aretraded or accumulated, the user continues with the process from step 712as shown in FIG. 7. The user may also purchase or borrow additionalpoints to make purchases or trades. The exchange server computer 20would request the merchant computer to deliver the item to the user. Theuser delivery information may be retrieved from the exchange servercomputer 20 or may be supplied in some other manner. The exchange servercomputer 20 would decrease the user exchange account 54 by the number ofpoints or value corresponding to the purchased item (step 714). Theexchange server computer 20 conveys consideration to the merchantcomputer 30 equivalent to the cost of the item by means well known inthe art of electronic commerce (e.g. by a preexisting account, creditcard, etc.) (steps 716, 718). In the alternative, the consideration maybe a direct transfer of points to an account associated with themerchant. The merchant, transaction broker, liquidator or member thencompletes the transaction at step 720, for example by delivering thepurchased item. A transaction fee may be charged by any of the partiesin the form of points, cash or cash equivalent, etc. Also, a deliveryfee may be charged for delivery of the product.

Policies and profiles may be established to automatically contact eachof the reward servers according to a user profile, merchant profile,broker dealer profile, issuer profile, or product provider redemptionprofile (see FIG. 5) to transact the required payment for an itemselected by a user. This profile may indicate the order of redemptionand method of providing funds sufficient to cover the purchase afterredeemable points are exhausted. For example, if a user has a preferredair carrier where the user would like to retain mileage in that rewardsystem, the user may specify a priority of use indicating the rewardresources that should be exhausted prior to accessing the most desirablerewards. Following the selection of an item to be acquired, the servermay contact all of the reward resources according to this profile toselectively redeem each as required to meet the purchase price. Theprocess may be performed in real time or as a background processtransparent to the user, or where the user may select how thetransaction should proceed. If the user exhausts lower personal worthresources from the reward servers, the system may be required to contactthe user before the transaction is allowed to proceed to redeem points.A classification system may also be used to indicate rewards of similarworth or category. If for instance, a frequent flyer program supportsmultiple classifications of miles that may be redeemed differently, theuser may optionally define how those resources should be managed duringredemption. The redemption process would then honor those rules electedby the user to select from several different reward programs instead ofredeeming rewards strictly on a value required from the first rewardprogram contacted or based upon a preferred hierarchy defined by thesystem or its members.

FIG. 8 describes the process steps involved in enrolling a user toutilize the exchange server. The user accesses the exchange server 20 atstep 800 and selects an option to create a user account at step 802. Thedata entered by the user may be used in determining whether a userallows unsolicited offers to be presented from the exchange server. Inaddition, offers may be provided in an automatic fashion without userinteraction. The user's preferences for manufactured goods services,products, travel destinations, hobbies, interests or any other userentered criteria may be stored in the database for subsequent use by thesystem (steps 804 and 808). The exchange server has the ability toreceive offers from reward servers or merchants (steps 806 and 808)which may then be directed in real time to users based on the databaseprofile information provided by the user or other third party (e.g anissuer, merchant, etc.) (see FIG. 9). At step 900, the reward servercontacts the exchange server with an offer to redeem points. Similarly,a merchant may contact the exchange server with an offer to bedistributed or offered in the exchange to members (step 902). Theexchange server records the offer in a database (step 906), and theexchange server may record a conversion rate or rules in its databasefor that trade (step 906). The reward server may then contact the userwith an offer to redeem at step 908. Optionally, the process may branchto the flow diagram in FIG. 6 discussed above (step 910).

The exchange server may also be contacted in response to a button orhyperlink located on a web page accessible by the user from the airlinereward server (FIG. 10, steps 1000 and 1002). The process may continueto that described with respect to FIG. 6 for trading points into areward exchange account (step 1004). In a similar manner, hyperlinks orcalling routines may allow a user to access a reservations system ormerchant from the exchange server. The link would direct the user topartner or associated air carriers where the points in a user exchangeaccount on the exchange server 20 may be used to acquire hotelaccommodations, special offers, reduced fare or charter or free flights.

The system used to implement the aforementioned method will now bedisclosed with respect to FIG. 5. The system is comprised of an exchangeserver computer connected to a network of computers where a userinterface is established whereby a user from a user computer may accessthe server to request the transaction to contact a reward servercomputer system. In the preferred embodiment, the server has memorymeans for storing the user account information, user profiles and ruleswhich may be specified by the user, system, issuer, member or merchant.The exchange server also has communications means to allow users toaccess the server and to allow the exchange server to contact rewardservers and processing means to interpret the rules and coordinate thecontact to the respective servers. The processing means is adapted toallow the user to request and exchange consideration for rewards fromreward servers. The processing means additionally is adapted tocoordinate the exchange of consideration and increase or decrease theuser exchange accounts stored in memory in response to actions performedby the user computer, reward server and merchants and issuers.

In one aspect of the invention, new products may be made available inthe exchange before they are generally available to the public (“advancesales”), so that the manufacturers can determine the demand for theproducts prior to committing to the full costs of marketing anddistribution of the products.

In another aspect of the invention, reward points are considered to havea par value, which is the cost of redeeming a point by the issuingentity. For example, assume that a points issuer assigns a par value of0.25 cents per point. When the points issuer awards 10,000 points to acustomer (e.g. for flying 10,000 miles), then the actual cost to theissuer is $25.00. This par value is the value that the issuer willassign to the outstanding points on its records for redemption,surrender or retirement. Thus, an issuer with 10,000,000 points awardedhas a liability (sometimes referred to as a contingent liability) of$25,000.

Points also may be considered to have a retail value which is the valuethat a consumer or user obtains (or perceives that he or she shouldfairly obtain) based on redeeming or surrendering the points, forexample in a redemption transaction. For example, most consumers ascribea retail value of 1 cent per point. This means that an account that has10,000 points in it has a total retail value of $100.00 to thatconsumer. In the event that a consumer is only able to redeem those10,000 points for something worth less than $100, he has obtained lessthan the full retail or perceived value and this transaction isunattractive to him. Likewise, in the event that the consumer is able toredeem those 10,000 points for something with a perceived value worthmore than $100, he has obtained more than the full or perceived retailvalue and this transaction is attractive to him. Issues arise when thepar value (the value that the issuer is willing to convey in order tosurrender or retire the points) is less than the retail value (the valuethat the consumer is willing to accept to redeem the points), whichissues are addressed and resolved by an embodiment of the presentinvention described herein.

In one embodiment, the par value of the points may be varied by thepoints issuer, after issuance (e.g. while in an account of a user),based upon factors such as the rate of redemption of points by otherusers. For example, if the rate of redemption becomes excessively large,this may negatively impact the cash position of the issuer since pointsredemption generally results in cash flow out of the issuer to productand service providers. Thus, when an issuer determines that the cashflow is excessive, it may reduce the par value such that subsequentredemptions will result in a lower cash flow rate. For example, anissuer may be normally redeeming points at the rate of 0.25 cents perpoint; that is, it pays 0.25 cents to a merchant or aggregator whendirected by a user in exchange for reducing the user's points account byone point. In the event that an excessive number of points are redeemedor tendered, then the issuer (or aggregator or trader) may change thevalue to 0.125 cents per point such that the user would only receive a$12.50 credit for redeeming 10,000 points. The issuer/aggregator maycontinue this reduced rate of exchange until such time that cash flowlevels out to an acceptable rate. Of course, the issuer may also furtherreduce the exchange rate in order to ameliorate the cash flow evenfurther, if desired. In addition, certain types of trades or redemptionsmay be limited from time to time in order to control redemption rates,etc.

Likewise, in an embodiment wherein a product liquidator charges acertain liquidation price in exchange for points redemption, then theliquidator may also vary the liquidation price based upon the current orprojected sales volume. Thus, when the rate of sales increases due to arelatively low product price offering, then the liquidator may increasethe price to either (1) slow down the redemption rate, and/or (2)increase its cash flow.

In a further embodiment, a bulletin board may be used on a computernetwork wherein the value of points, last trade price, bid/askparameters, etc. are posted to provide a points exchange environment.

In the preferred embodiment, the memory means comprises a databasestructure that is used to record the transactions associated with thepreviously described method. Records indicating the changes and currentvalue of user exchange accounts are updated according to the requestprocessed by the processor. This invention also implements the recordingand subsequent reporting of factors such as the average retail valueredeemed to date, the rate of redemption, and other liquidationliability factors.

In response to a request for redemption, the exchange server looks upthe contact properties of the reward server to be contacted. Propertiesmay be fixed for a certain time or variable on a bid/ask basis pertrade. Market offers can be fixed for a certain time, or value, orproduct. The user information is submitted to the reward server todisplay the available points that may be redeemed. In anotherembodiment, the request additionally contains a value to be redeemed.The processor establishes a communication link with the reward serverand a transaction request is sent to the processor of the reward server.The processor of the reward server may perform actions that may allow orrefuse the requested action, or suggest an alternative action. Inanother embodiment, the exchange server processor may be granted directauthorization to modify the user's records in the reward server databasewithout analysis by the processor of the reward server. A conversionrate may be applied to the transaction such that the reward serverreduces the available rewards or value in the user's account. The rewardserver then transfers consideration to the exchange server thatcorresponds to the value reduced or available in the reward system. Inresponse to the receipt of the transfer or approval of the transfer, theexchange server increments the user account balance to reflect thereceived (or issued or acquired) consideration and the connection to thereward server is terminated. A transaction log may be used to recordeach of the transactions in case a reconciliation process is required ata later time. The new value, whether increased or decreased in theuser's exchange account may then be stored until a user finds an item tobe purchased or trade to be engaged.

The user selects the desired object from the merchants (or offering menuin the exchange) by indicating the type of product or service to beprocured. In one embodiment, the exchange server contacts the merchantserver to return to the user a list of products that match the user'ssearch criteria or if the user had specified in detail what was desired,the product may be directly acquired from a merchant, trader, member orbroker/dealer. A communication link is established between the exchangeserver and the merchant computer or designee for e-commerce. Directacquisition may be enacted by contacting the merchant or broker/dealercomputer and supplying the user indicia, the product indicia, and theretail value sufficient to secure the transaction. In response to thetransaction request, the merchant computer or broker/dealer will receivethe consideration supplied and contract for the delivery of the product.Unfulfilled requests are stored and when available can be pushed to theuser. In another embodiment, the consideration required for the itemselected is sent to the exchange server where based on the availablepoints in the user's exchange account the exchange server will determinewhether the consideration is available. An authorization process may beincorporated at this point to request authorization from the user or ina more simplified process, the consideration will be transferred to themerchant computer and the user's exchange account will be reduced. Themerchant computer will receive the consideration and will effectuate adelivery transaction to be issued.

The goods may also be placed under direct control of a distribution armof the trading service so that the user places the order with thetrading service directly and the merchants are not directly involvedwith the sale of the goods.

In a situation wherein the user finds it necessary or desirable toreturn a product, such as when the product may be damaged, thenprovision is made for the restocking of points back into the useraccount (rather than a cash refund), with an optional restocking feebeing charged to the user in the form of points.

Thus, the present invention provides a liability management system forissuers of reward points, which allows them to retire points (takepoints off the books) and eliminate them, if desired, at a discounted(or premium) rate. This system enables the sale or repurchase of pointswith a trading strategy in which points need not expire, or may beretired at a controlled rate or value. The value ascribed to the points(the par value) may be changed by the points issuer/aggregator based onthe rate of redemption of the points with respect to the issuers'ability to maintain cash flow, or as may be determined by the market.That is, the par value of the points may be varied by the points issuer,after issuance, based upon factors such as the rate of redemption ofpoints by other users. For example, if the rate of redemption becomesexcessively large, this may negatively impact the cash position of theissuer since points redemption generally results in cash flow out of theissuer to product and service providers. Thus, when an issuer determinesthat the cash flow is excessive, it may reduce the par value such thatsubsequent redemptions will result in a lower cash flow rate. Likewise,when an issuer determines that the cash flow is low, it may if sodesired increase the par value such that subsequent redemptions willresult in a higher cash flow rate

The present system may be implemented by means of a smart card (orcredit/stored value card, or loyalty or frequency of use card) whereinfrequent use points may be accumulated on the user's card every time thecard is used for associated application. For example, if a user uses hissmart card to pay for a hotel that normally gives reward points, thosereward points may be stored on the smart card. Likewise, when the cardis used for the purchase of an airline ticket, the points would be addedto the smart card. The user may then redeem the accumulated rewardpoints by inserting the card into a reader associated with a computerconnected to the Internet or other authorized communication system (e.g.an ATM/POS device or other reader). The trading process proceeds asdescribed above, except that the points are obtained directly from thesmart card or system rather than a reward server. Information providedto the user regarding the user's reward points is updated after everytransaction.

The user may have a credit card, debit card, or stored value card thatis linked to their points account in such a way as to permit them to payfor purchases with a merchant by using the card, wherein the merchantuses the existing credit card payment infrastructure as if payment werebeing made/authorized by a bank linked to the credit card or debit cardaccount, but in fact the card may be linked to the user's pointsaccount. In this manner, the user and merchant can use the pointsaccount to pay for purchases in a seamless manner whereby points areused for consideration rather than or as a supplement to cash andtraditional credit.

Other aspects of this invention will now be disclosed that will enhancethe reader's understanding of the application of this invention.

The user can purchase points from the system, borrow points from thesystem, option points from the system, etc., and basically treat thepoints as cash consideration or as a commodity for purposes of suchtransactions. Points may be borrowed by a consumer or other member ofthe network in order to use them to obtain liquidated or other products,the consumer will be required to pay interest to the pointsissuer/aggregator or provider based on the points borrowed. Since thevalue of the points borrowed may be measured by the price of theliquidated products purchased with those points, and the liquidationprice may be varied by the liquidation broker, then the relativeinterest rate charged by the issuer may vary as well. For example, aconsumer wants to purchase a TV with an MSRP of $1,000 from aliquidation broker. The consumer contracts with a bank (or other lender)to borrow 100,000 points from a bank, which in this case acts as thepoints issuing entity. The bank agrees to convey consideration to theliquidation broker to cover the cost of the TV, and the consumer agreesto repay the value of 100,000 points to the bank with interest at a rateof 10%. The bank, however, is only required to pay a liquidation sum of$500 to the liquidation broker in exchange for the TV being delivered tothe consumer. Thus, the bank has provided 100,000 points to the consumerto obtain the TV, but has only had to expend $500 in cash, thus doublingthe effective rate of return on the lending of points to the consumer.The consumer may also borrow points for purchase of non-liquidated itemsas well.

The system can prioritize the order of points being traded based on apredetermined set of rules such as in higher value points being issuedbefore those with a lower value.

Merchandisers also benefit from the use of this system where anothermarketing channel is afforded for products that are often purchased byfrequent travelers with high disposable income. Products and servicesencompassing jewelry, flowers, limousine transport, timeshare rental maybe exchangeable for points stored in this system. Items purchasedthrough the system may also be paid for by a combination of points andcurrency which might be the case when a user does not have enoughaccrued points to meet the purchase consideration of an item selected.There may be designations where a percentage of the product may be paidwith points, with the rest in cash or cash equivalent.

It is anticipated that high quality limited access products may benefitfrom the distribution methods afforded by this system. For example,companies like SONY and Chanel may take advantage of this distributionmeans without impacting the level of quality or excellence associatedwith their products.

Manufacturers can discount or liquidate goods for points in a mannerthat doesn't negatively affect the perceived value of the goods (i.e.not in direct competition with the mainstream sales). That is, themanufacturer can place overstocked, end of run type goods and the like,place them in the chain of distribution for exchange with points, andnot be in direct competition with cash sales of its mainstream products.

Resort destinations that are managed by property management companiessuch as RCI may be integrated into this system where instead of tradingaccommodations with only those having similar property, it is nowpossible that the rental of the property may be achieved by conversionfor points or points plus a property timeshare or a percentage of cash.Rooms or inventory or any vacation product (e.g. boat timeshares) may bebooked with discounts that vary in accordance with the number of roomsavailable, which can change in real time as per the changingavailability of rooms or inventory.

Offers may be distributed to users of this system where substantialrebates or reduced rates are described in the offer. Time sensitiveproduct offerings can also be accommodated in the system where the valueof the product is decreased according to a life span of the product.Time sensitive product offerings such as food products or concerttickets, airline departures, hotel room rentals and the like can have anassociated diminishing or escalating value based on the length oravailability of the offer. This invention may be used to provide hotelrooms such that when rooms are available and the date of use approaches,the rental price may decrease or increase (the same methodologies may beused to sell advertising space that is time-sensitive).

Using this system it is now possible to coordinate the products ofseveral different providers into one package. A user of this system maytherefore select an airline, hotel, car rental and Broadway show ticketsin New York, individually or in a prepared package from one location bytrading points where the package may not have existed before where thetrading system coordinates all aspect of the transaction and reduces theuser's exchange rewards in a corresponding manner.

A purchasing club, organization, corporation or group may utilize thepresent invention in order to purchase items in bulk. For example, atransaction may be configured wherein a purchasing club can obtain 100TVs at a substantial discount, if and only if they agree to purchase allor a substantial portion of them.

Other purchasing leverage not specifically addressed previously may alsobe acquired by combining the power of a pool of users of this systemwhere these users may be allocated access to products or services notgenerally distributed to the remainder of the system users. Pointscollected in the system by these users may afford them access to limiteddistribution channels where higher discount levels or premium productsmay be acquired. Direct access to cartel or special club products suchas diamonds, bulk or price-advantaged products, duty free items andother restricted access product or service offerings are alsoaccommodated through the coordination of the exchange server with thesespecialized service and product providers. For example, a preferredclient distribution channel such as found in a European market forluxury goods would be made available to users of this system where theprices for the objects in this preferred channel may be significantlylower than retail for objects that are typically reserved for limiteddistribution at premium prices. The exchange server may additionallyhave exclusive rights to allocate access to certain premium products,services, events, travel destinations or accommodations in accordancewith any right or grant permitting such allocation to any user of thesystem. A distribution channel may make available exclusive products forall or a limited amount of the members of the system where the exchangeserver system controls access to the offer. Parameters associated withthe available quantity, duration, exchange rates, etc may be input intothe system to be used in the allocation algorithm to restrict the offer.Upon user access, the exchange server would, in these cases, modify thepremiums offered to reflect the immediately attainable items for thecurrent user and may additionally display or provide access to premiumsthat may be acquired through payment by other means (i.e. cash, charge,debit) to make up the difference between the user's available points andthe points required to accept the offer.

Junkets and cruises may be obtained in exchange for points and/or otherconsideration using the methods of the present invention as describedherein. Video and/or music files may be downloaded or otherwise obtainedin exchange for points and/or other consideration using the methods ofthe present invention as described herein.

In one embodiment, the present invention utilizes a graphic on a webpage that shows the availability of an item, such as the number of itemsleft (or about to expire) for a given offer—similar to a running meter.This meter would be updated in real time so that a user would know whenthe offer will soon be expired due to unavailability of an item.

In another embodiment of this invention, airlines seeking to providehigher levels of personalized service for their business travelers willprovide access to the Internet or access to in-flight services such asvideo games, for a fee or in place of granting mileage rewards ontranscontinental or transatlantic flights. Access to video games orother services (e.g. meals and drinks) may be afforded to the travelerwhere the availability of different games depends on the number ofreward points traded in by the traveler. The rewards may be convertedusing the exchange server of this invention, where the user may opt toforego collecting mileage in return for accessing on-board entertainmentprovided in a standalone mode or in a linked mode. For example, usersmay select to play video games, access the Internet or utilize Email viaa seatback or tray table mounted interface and controller. The user mayoptionally connect a laptop computer to an interface port of theaircraft using an Ethernet, parallel, USB connection or proprietaryconnector provided by the air carrier. In the preferred embodiment, theuser would select the connection speed and type for communications basedon whether in-flight or external services were to be accessed. Othertypes of business services may additionally be used and accounted for,such as using network printers or fax equipment. RF, satellite ormicrowave based communications may be used for real time communicationswhere sufficient geographical coverage is provided.

The interface would allow a user to login using the frequent flyeraccount information or preferably, the exchange server account login idand password, where the user may use points awarded from another aircarrier or point server to “pay” for the services accessed. The accountbalance from the exchange server may be transferred to the localcontroller prior to takeoff for each user that logs in to the exchangeserver. Once the plane has departed, depending on the linking or accesscapability afforded by the air carrier or service provider, the user'saccount may be modified in real time or upon reconnection followinglanding, based on services selected by the traveler. If a real time linkis supported, the user's exchange account may be periodically debitedaccording to the services selected and duration of use, certifiedagainst the passenger log.

In another aspect of the invention, an electronic liquidation orbartering system is implemented, wherein product providers such asmanufacturers, wholesalers, retailers, producers, distributors, etc. canprovide surplus, returns, discontinued or overstocked goods forliquidation into the chain of supply of the system and exchange then forpoints as described herein. This provides an inventory management andliquidation system for these manufacturers and sellers. This embodimentis further described with respect to FIG. 11.

In this embodiment, three basic functions are performed—typically bythree distinct parties, but one party could perform more than onefunction in some embodiments. The three functions are (1) a productprovider 1100, which provides a product (or service), (2) a transactingentity 1102, which provides transaction facilitation or supervision, and(3) a reward account holder 1104, which provides issuance and/oraggregation of reward points that will be used towards the purchase ofthe product or service in a transaction carried out by the transactingentity 1102 The reward account holder may be a reward point issuer 1106or it may be a reward exchange trading entity 1108 that aggregatesreward points from multiple reward point issuing entities 1110 aspreviously described. In either case, the reward account holdermaintains an account on behalf of a user that holds value, typically inthe form of reward points that have a par value (the value the rewardaccount holder is willing to pay on surrender of the points) as well asa retail value (the value a user desires to obtain from redeeming orsurrendering the points) as previously described. In some cases, rewardpoints may be exchanged or aggregated in real time (at the time ofredemption for a product as described herein.

In some cases, a product provider 1100 might perform functions of thetransacting entity 1102 as well, or the reward account holder 1104 (i.e.the reward points issuer and/or aggregator) might perform the functionsof the transacting entity 1102 (in these cases, there are only twoentities performing the three functions). In another case, the rewardaccount holder 1104 may provide the products as well, or the transactingentity 1102 may provide the product, etc. In certain cases, one partymay perform all three functions.

In a typical embodiment, FIG. 11 shows a system for executing a productliquidation transaction in association with a product liquidationservice run by a transacting entity 1102. The transacting entity(referred to herein also as the liquidation broker) may be anindependent third party, the exchange system itself, or the functionsperformed by the liquidation broker 1102 may be performed by a productor service provider 1100 or reward points issuer 1106 or aggregator1108. In the case where the liquidation broker 1102 is an independentthird party (FIG. 11), one or more product providers 1100 (such as amanufacturer 1112, wholesaler 1114, distributor 1116, retailer 1118 orliquidator 1120) subscribe to the liquidation service provided by thetransacting entity 1102, thus forming a product supplier network 1122 inassociation with the transacting entity 1102. Products to be liquidatedmay be made available to the user or consumer 1124 directly from themanufacturer 1112, or via any other product provider 1100. For example,a television manufactured by SONY may be liquidated under this inventiondirectly from SONY (such as from the SONY web site www.sony.com), orfrom a distributor 1116 or other product provider 1100, etc. Inaddition, the product to be liquidated may be made available from a website catalog of a points issuer/aggregator or some other third party orlisted directly on a points exchange server through a pre-arrangedagreement with the provider of the product or directly listed oradvertised by the exchange server or network. The actual source of theproduct to be liquidated under this invention makes no difference to theconsumer 1124, who will obtain the product substantially in exchange forreward points as now described.

One or more reward account holders also subscribe to the liquidationservice provided by the liquidation broker or transacting entity 1102,thus forming a reward points network 1126 in association with theliquidation broker. As shown in FIG. 11, the liquidation broker 1102acts as an intermediary between the product provider network 1122 andthe reward points network 1126 to provide a product selected by aconsumer 1124 from the product provider network 1122 substantially inexchange for reward points in a user's reward points account held by areward account holder that is part of the reward points network 1126.

In accordance with this invention, a consumer 1124 obtains a liquidatedproduct in exchange for reward points from his or her reward pointaccount, wherein the transaction is brokered and supervised by theliquidation broker as the transacting entity. The consumer will provideconsideration in the form of a combination of reward points and a cash(or credit based) portion, wherein the total value of the cash portionand the retail value of the points as previously defined issubstantially equivalent to a reference price such as the MSRP(manufacturer's suggested retail price). In this manner, it does notappear to the consumer that it is a liquidation purchase (i.e. theliquidation aspects of the transaction are transparent to the consumeror purchaser or acquirer), and the usual brand devaluation that wouldnormally occur with liquidation sales does not occur. For example,assume that the retail value is considered by a consumer in a giventransaction to be 0.01 (one cent) per point, and the consumer wants topurchase a SONY television at an MSRP of $1,000. The consumer views aweb page from a web site maintained by one of the parties, such as theliquidation broker, and is given an offer to acquire the SONY televisionin exchange for $250 cash and 25,000 reward points. Since the retailvalue of each reward point in this case 0.01, the consumer perceivesthat he has paid a value equivalent in reward points to $250(25,000×0.01=$250) plus the $250 cash, for a total perceived value of$500, which is still much less than the MSRP of $1,000.00 for thetelevision. As a result, the consumer perceives that he has receivedvalue of $750 for his 25,000 reward points, which is 0.03 per point orthree times the retail value, and his or her incentive to use thissystem is the ease of purchasing the product using only reward points ata much higher retail value(or reward points and other consideration suchas cash or credit card in an alternative embodiment). The consumerperceives that he has paid cash and reward points equal to the MSRP ofthe television with his reward points having a retail value of threecents each, which is highly attractive to the consumer.

In this situation, the liquidation broker receives the $250 cash paymentfrom the consumer and pays $250 to the product provider (SONY or adistributor) in full payment for the television, which is delivered tothe consumer. The liquidation broker also causes the consumer's rewardpoints account, held by a designated reward account holder, to decreaseby the 25,000 points. The liquidation broker can then take one ofseveral actions. First, it may simply transact with the reward accountholder to redeem those 25,000 points, at a par value of 0.25 cents perpoint paid by the reward account holder to the liquidation broker, whichprovides a cash flow of $62.50 which is fully retained by theliquidation broker. This provides a 25% profit margin to the liquidationbroker based on the initial $250 transaction. In the alternative toredeeming or surrendering the points directly with the reward accountholder, the liquidation broker may seek to sell the points to a 3^(rd)party marketer at a resale value of 0.01 per point (One cent per point).This would provide a profit of $250 rather than $62.50. The 3^(rd) partymarketer has incentive to purchase points at 0.01 per point since itusually must do so at 0.02 per point directly with the issuer.

In the alternative, if the product is provided directly from themanufacturer to the consumer or exchange system, then the liquidationbroker or exchange system pays the manufacturer directly and retains thebalance as its profit.

In an alternative embodiment, the liquidation brokerage functions areperformed by the product provider 1100 rather than an independent thirdparty 1102. In this case, then the product provider 1100 interacts withthe consumer 1124 to receive a request for a product being liquidated(e.g. a selection on a web page), interacts with the reward accountholder 1104 to remove the reward points from the consumer's account,receives consideration in exchange for removing the reward points fromthe reward account holder, arranges for conveyance or delivery of theliquidated item to the consumer, and retains a substantial profit (thedifference between full consideration received from the reward accountholder and the liquidation price paid to the product provider).

In another alternative embodiment, the reward account holder may act asthe liquidation broker. In this case, a consumer, would select thedesired product from a catalog or web site provided by the rewardaccount holder, and the reward account holder would convey consideration(the liquidation price) directly to the product provider. So, forexample, when the liquidation price is $250.00 and the MSRP is$1,000.00, the manufacturer receives $250.00 and the consumer's rewardpoints account is debited by 100,000 points. Here, the reward accountholder reaps the benefit of the higher profit margin for the liquidationtransaction.

Accordingly, several benefits are realized by this aspect of theinvention. The reward account holder (whether it is a reward pointissuer or an aggregator) realizes a decrease in a liability associatedwith the reward account that is substantially more than the totalconsideration paid for the transaction. The consumer receives thedesired product substantially in exchange for reward points, and saidmanufacturer liquidates the product at substantially the same price thatit would otherwise realize in a standard wholesale transaction.

As described herein, the product to be liquidated and obtained by theuser may be provided by any of the product providers in the productdistribution chain (i.e. the manufacturer 1112, wholesaler 1114,distributor 1116, retailer 1118 or liquidator 1120). In addition, theproduct may exist at several or all of these product providers, and itmay be delivered (e.g. drop shipped) to the user after payment istendered to any party having a contractual arrangement to do so. Forexample, a manufacturer may transact with the liquidation broker andobtain payment as described above, but instead of delivering the productdirectly from the manufacturer to the user, the product may be locatedat a distributor and the manufacturer may request the distributor toship the product to the user. In this event, the manufacturer mayprovide a credit to the account of the product provider that ships theproduct to the user, for example in the form of new products that wouldreplace the liquidated product. An example of this would be if amanufacturer decides to liquidate a certain older television model, andinstructs all product providers in the distribution line that they willreceive a newer television model for the older models that they shipunder this liquidation process. In this manner, a product that exists atsome or all of the entities in the distribution chain (distributor,retailers, etc.) may be liquidated without the manufacturer (or anysingle entity transacting with the liquidation broker) being required tohave actual physical possession of the product for shipment to the user.This enables the manufacturer to liquidate a product from themarketplace quickly (e.g. without having top recall them) and reduce thetime to market for new products.

In another embodiment, the liquidation broker sets up a points escrowaccount on behalf of the consumer, and acts to transfer reward pointsfrom one or more issuers into the escrow account when requested by theconsumer. The liquidation broker may then carry out liquidation purchasetransactions as further requested by the consumer.

In another embodiment, the value of the reward points may fluctuate as afunction of the company's performance, which may be measured byreference to the price of its stock, revenue, earnings, or some otherparameter that is agreed to that reflects the relative performance ofthe company The number or value of points outstanding being redeemedalso may also be a factor). In this manner, companies that perform wellwould provide an additional incentive to a user for using their frequentuse program rather than a competitor's program. For example, all otherparameters being the same, a user would likely choose the Acme creditcard company over the Beta credit card company when the user determinesthat the Acme company performance results in a 10% increase in the valueof points otherwise earned by using its credit card. The value may alsofluctuate as a function of the number of points outstanding or thedesirability of the issuer to reduce its liability or make it morerobust.

In a further embodiment, the present invention may be utilized to allowusers to pay for items won in an auction with points aggregated asdescribed above. In this embodiment, a user may participate in anauction, such as one of many known auction services executed over theInternet, whereby a user selects an item that he or she would like tobid on from a web page provided by a merchant computer web site, or evenby a web site hosted by the exchange server computer or a third partyauction service provider. The auction may be carried out in any numberof well known ways, such as for example when all bidders may bid upuntil a date and time when the auction ends, and the highest bidder orgroup of bidders wins the auction. The winning bidder may then designatereward points from his or her reward points exchange account to be usedto pay for the item bid for and won in the auction. The accumulatedreward points are selected by the user, and consideration is conveyed tothe merchant/seller in exchange for the auctioned item as describedabove.

1-15. (canceled)
 16. A computer-implemented method of executing aproduct liquidation transaction in conjunction with a reward accountstored on a reward server computer, comprising the steps of: a. a userhaving a reward account stored on a reward server computer associatedwith a reward account issuer comprising reward points previously awardedby a reward issuing entity to the user as part of a previoustransaction, the reward points having i) a par value established by thereward account issuer equivalent to an amount that the reward accountissuer will convey upon surrender of said reward points, and ii) aretail value equivalent to an amount that the user will accept forsurrender of said reward points, said retail value being substantiallyhigher than said par value; the reward account issuer varying the parvalue as a function of a rate of redemption of reward points from one ormore of a plurality of reward accounts; b. a product provider offeringto sell a product at a liquidation price that is substantially less thana reference price otherwise charged for the product; c. the userrequesting a transacting entity to facilitate the user in obtaining theproduct by surrendering at least some of the reward points from thereward account stored on the reward server computer to the rewardaccount issuer, the number of reward points surrendered having a parvalue that is varied by the reward account issuer as a function of arate of redemption of reward points from one or more of a plurality ofreward accounts and a retail value substantially equal to the referenceprice; d. requesting the reward account issuer to convey to thetransacting entity the par value of the surrendered reward points; e.the transacting entity conveying consideration to the product providerequivalent to the liquidation price of the product; and f. the productprovider causing the product to be conveyed to the user; whereby theuser receives the product from the product provider as a result of atleast surrendering the reward points from the reward account stored onthe reward server computer.
 17. The method of claim 16 wherein theliquidation price of the product is equivalent to the par value of thereward points and other consideration.
 18. The method of claim 16wherein the reward account issuer is a single reward issuing entity. 19.The method of claim 16 wherein the reward account issuer is anaggregator and the reward account is an exchange account comprisingreward point value obtained as a result of exchanging reward points fromseparate reward point accounts stored in separate reward point servercomputers in association with different reward issuing entities.
 20. Asystem for executing a product liquidation transaction comprising: a. areward points server computer selectively interconnected over a computernetwork and associated with a reward account issuer, comprising datastorage means for storing a reward account associated with a user, thereward account configured to track reward points previously earned bythe user for previous transactions between the user and a reward issuingentity, wherein the reward points have i) a par value established by thereward account issuer equivalent to the amount that the reward accountissuer will convey upon surrender of said reward points, and ii) aretail value equivalent to an amount that the user will accept forsurrender of said reward points, said retail value being substantiallyhigher than said par value, the reward account issuer varying the parvalue as a function of a rate of redemption of reward points from one ormore of a plurality of reward accounts; b. a product provider servercomputer selectively interconnected over the computer network andassociated with a product provider, comprising means for offering tosell a product at a liquidation price that is substantially less than areference price otherwise charged for the product; c. a user computerselectively interconnected over the computer network and associated witha user, comprising means for requesting a transacting entity tofacilitate the user in obtaining the product by surrendering at leastsome of the reward points to the reward account issuer, the number ofreward points surrendered having a par value that is varied by thereward account issuer as a function of a rate of redemption of rewardpoints from one or more of a plurality of reward accounts and a retailvalue substantially equal to the reference price; d. a transactionserver computer selectively interconnected over the computer network andassociated with a transacting entity, comprising: i. means forrequesting the reward account issuer to convey to the transacting entitythe par value of the surrendered reward points; ii. means for conveyingconsideration to the product provider equivalent to the liquidationprice of the product; whereby the user receives the product from theproduct provider as a result of at least surrendering the reward points.21. The system of claim 20 wherein the liquidation price of the productis equivalent to the par value of the reward points and otherconsideration.
 22. The system of claim 20 wherein the reward accountissuer is a single reward issuing entity.
 23. The system of claim 20wherein the reward account issuer is an aggregator and the rewardaccount is an exchange account comprising reward point value obtained asa result of exchanging reward points from separate reward point accountsstored in separate reward point server computers in association withdifferent reward issuing entities.
 24. A computer-implemented method ofa transacting entity facilitating a product liquidation transactioncomprising the steps of: a. a transacting entity offering a product forsale from a product provider to a user in exchange for a quantity ofreward values, the reward values being stored in a reward account heldby a reward account holder on a reward server computer comprising rewardvalues previously provided by a reward issuing entity to the user, thereward values having a par value attributed by the reward account holderequivalent to a first amount that the reward account holder is willingto convey upon surrender of said reward values, the reward accountholder varying the par value as a function of a rate of redemption ofreward values from one or more of a plurality of reward accounts, thereward values also having a retail value attributed by the userequivalent to a second amount that the user is willing to accept uponsurrender of said reward values, wherein the retail value of thequantity of reward values is equivalent to a reference price; b.accepting a request from a user to convey the product in exchange forthe quantity of reward values from the reward server computer specifiedby the transacting entity; c. causing the reward account on the rewardserver computer to be reduced by the quantity of reward values specifiedby the transacting entity; d. effecting a transfer of consideration fromthe reward account holder on the reward server computer to the productprovider, the consideration equivalent to a liquidation price that issubstantially less than the reference price; and e. causing the productprovider to transfer the product to the user.
 25. The method of claim 24wherein the liquidation price of the product is equivalent to the parvalue of the reward values and other consideration.
 26. A producttransaction server computer comprising: a. means for offering a productfor sale from a product provider to a user in exchange for a quantity ofreward values, the reward values being stored in a reward account heldby a reward account holder comprising reward values previously providedby a reward issuing entity to the user, the reward values having a parvalue attributed by the reward account holder equivalent to a firstamount that the reward account holder is willing to convey uponsurrender of said reward values, the reward account holder varying thepar value as a function of a rate of redemption of reward values fromone or more of a plurality of reward accounts, the reward values alsohaving a retail value attributed by the user equivalent to a secondamount that the user is willing to accept upon surrender of said rewardvalues, wherein the retail value of the quantity of reward values isequivalent to a reference price; b. means for accepting a request from auser to convey the product in exchange for the quantity of reward valuesspecified by the transacting entity; c. means for causing the rewardaccount to be reduced by the quantity of reward values specified by thetransacting entity; d. means for effecting a transfer of considerationfrom the reward account holder to the product provider, theconsideration equivalent to a liquidation price that is substantiallyless than the reference price; and e. means for causing the productprovider to transfer the product to the user.
 27. A product transactionserver computer comprising processing circuitry programmed to operatethe computer to: a. enable offering a product for sale from a productprovider to a user in exchange for a quantity of reward values, thereward values being stored in a reward account held by a reward accountholder comprising reward values previously provided by a reward issuingentity to the user, the reward values having a par value attributed bythe reward account holder equivalent to a first amount that the rewardaccount holder is willing to convey upon surrender of said rewardvalues, the reward account holder varying the par value as a function ofa rate of redemption of reward values from one or more of a plurality ofreward accounts, the reward values also having a retail value attributedby the user equivalent to a second amount that the user is willing toaccept upon surrender of said reward values, wherein the retail value ofthe quantity of reward values is equivalent to a reference price; b.accept a request from a user to convey the product in exchange for thequantity of reward values specified by the transacting entity; c. causethe reward account to be reduced by the quantity of reward valuesspecified by the transacting entity; d. effect a transfer ofconsideration from the reward account holder to the product provider,the consideration equivalent to a liquidation price that issubstantially less than the reference price; and e. cause the productprovider to transfer the product to the user.
 28. A computer-implementedmethod of a product provider facilitating a product liquidationtransaction comprising the steps of: a. causing a transacting entity tooffer a product for sale to a user in exchange for a quantity of rewardvalues, the reward values being stored in a reward account held by areward account holder on a reward server computer comprising rewardvalues previously provided by a reward issuing entity to the user, thereward values having a par value attributed by the reward account holderequivalent to a first amount that the reward account holder is willingto convey upon surrender of said reward values, the reward accountholder varying the par value as a function of a rate of redemption ofreward values from one or more of a plurality of reward accounts, thereward values also having a retail value attributed by the userequivalent to a second amount that the user is willing to accept uponsurrender of said reward values, wherein the retail value of thequantity of reward values is equivalent to a reference price; b.authorizing the transacting entity to i) accept a request from a user toconvey the product in exchange for at least the quantity of rewardvalues specified by the transacting entity; ii) cause the reward accounton the reward server computer to be reduced by the quantity of rewardvalues specified by the transacting entity; and iii) effect a transferof consideration from the reward account holder on the reward servercomputer to the product provider, the consideration equivalent to thepar value of the reward values surrendered; and c. providing the productto the user.